Jeremy Hunt has today overturned the Prime Minister's entire leadership programme. It is a complete and career ending U-turn
Source - Daily Telegraph - 17/10/22
Her chancellor is gone. Her programme for government was just shredded. And as her credibility, well, the last shred of that was dispensed with by bond markets.
Of the £45 billion in tax cuts announced by ex-chancellor Kwasi Kwarteng last month, just £7 billion remain: the reversal of Rishi Sunak’s rise in national insurance and the cut in stamp duty. All the rest – the 1p cut in the basic rate of income tax, the corporation tax freeze, the £2 billion for the self-employed, the Vat-free shopping regime for tourists, the freeze on alcohol duty – is gone. And although the new chancellor Jeremy Hunt largely used the collective “we” in his statement, he slipped into the first person when discussing the measures: “I have decided.” Let there be no doubt about the new hierarchy.
This wasn’t just a bumper package of tax rises, however. It also included a potentially very large cut in spending, with Mr Hunt promising a curtailment of the absurdly large energy price guarantee package after the winter. The initial estimate for the cost of that scheme was £60 billion, but that only took us to next spring despite fears the rise in energy costs could remain beyond then. So it makes sense to introduce at least an element of means testing, which Hunt hinted at.
Most importantly, the market reaction was positive. Even before Hunt had opened his mouth gilt yields were falling (yields move inversely to prices) in anticipation, without the Bank of England intervening. If investors have decided that Mr Hunt is now th guardian of UK stability, he is essentially un-fireable.
The Tory Right aren’t happy, naturally, pointing out that the tax burden will rise unsustainably. But if Mr Kwarteng had not played so fast and loose with UK credibility, he could probably have escaped with some tax cuts. The problem is that the rise in borrowing costs triggered by his mini-Budget far outstripped the economic benefit delivered by lower taxes. The priority had to be to stabilise those costs.
Ms Truss, however, has left herself in an impossible situation. Having insisted that her growth plan was essential to reverse the country’s ailing fortunes, she can hardly defend the new approach with much vigour. It is now a question of when and not if she is forced out. Surely no Conservative, no matter how much they liked her original agenda, would be crazy enough to put a dead duck prime minister up for election?
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